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Oil Hovers Around $90: Are Permian Stocks Well Poised to Gain?
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Key Takeaways
FANG could benefit as oil above $90 supports Permian exploration and production activity.
XOM has strengthened its Permian position through Pioneer and lightweight proppant technology.
CVX has expanded Permian production while lowering capital spending through advanced drilling techniques.
Oil prices have been making newspaper headlines, as the Middle East conflict has pushed commodity prices higher and kept them elevated. Although the tensions have made the stock market highly uncertain, energy stocks have retained their appeal. Diamondback Energy, Inc. (FANG - Free Report) , ExxonMobil Holdings Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) are some players that are likely to gain amid this backdrop.
High Oil Price: Sweet Spot for Permian Producers?
West Texas Intermediate (“WTI”) crude is hovering around $90 per barrel. The high prices are being driven by ongoing tensions in the Middle East. The U.S. Energy Information Administration (“EIA”) in its latest short-term energy outlook projected WTI at $84.65 per barrel for this year, higher than $65.40 last year. A highly favorable pricing environment for the commodity is likely to continue supporting exploration and production activities.
In this regard, the upstream players that are operating in the Permian, the most prolific basin in the United States, are likely to continue gaining from the ongoing strength in oil prices. In the outlook, EIA estimated that total crude oil production in the Permian would be 6.76 million barrels per day this year, higher than 6.57 million barrels per day last year.
Thus, with high prices of the commodity, production will likely increase in the most prolific basin, aiding the bottom lines of explorers and producers operating in the basin.
3 Permian Players in the Spotlight
Diamondback Energy is a well-known pure-play Permian player. In the prolific basin, FANG has a huge and high-quality drilling site, with the company estimating it at roughly 8,854 gross locations. The upstream energy major mentioned that those wells are economical even if the price of oil fell to $50 per barrel. Thus, with premium drilling inventories and an investment-grade balance sheet, Diamondback Energy, carrying a Zacks Rank #3 (Hold), is likely to capitalize on the ongoing strength of oil prices.
ExxonMobil has a strong footprint in the Permian and is among the key assets that the energy major believes will contribute to its long-term production growth. In the Permian, the integrated giant has been employing lightweight proppant technology and hence has been capable of boosting its well recoveries. With the acquisition of Pioneer Natural Resources in 2024, XOM enhanced its footprint in the basin, further strengthening its production outlook while realizing significant cost synergies. Thus, XOM, with a Zacks Rank of 3, is well-positioned to gain. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chevron also has a strong footprint in the Permian. CVX stated that it has an interest in one of every five wells in the most prolific basin. Over the years, while growing its operations in the Permian, Zacks #3 Ranked CVX has been able to generate more production while using lower capital spending, thanks to advanced drilling techniques. Thus, like XOM and FANG, CVX is also strongly placed now.
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Oil Hovers Around $90: Are Permian Stocks Well Poised to Gain?
Key Takeaways
Oil prices have been making newspaper headlines, as the Middle East conflict has pushed commodity prices higher and kept them elevated. Although the tensions have made the stock market highly uncertain, energy stocks have retained their appeal. Diamondback Energy, Inc. (FANG - Free Report) , ExxonMobil Holdings Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) are some players that are likely to gain amid this backdrop.
High Oil Price: Sweet Spot for Permian Producers?
West Texas Intermediate (“WTI”) crude is hovering around $90 per barrel. The high prices are being driven by ongoing tensions in the Middle East. The U.S. Energy Information Administration (“EIA”) in its latest short-term energy outlook projected WTI at $84.65 per barrel for this year, higher than $65.40 last year. A highly favorable pricing environment for the commodity is likely to continue supporting exploration and production activities.
In this regard, the upstream players that are operating in the Permian, the most prolific basin in the United States, are likely to continue gaining from the ongoing strength in oil prices. In the outlook, EIA estimated that total crude oil production in the Permian would be 6.76 million barrels per day this year, higher than 6.57 million barrels per day last year.
Thus, with high prices of the commodity, production will likely increase in the most prolific basin, aiding the bottom lines of explorers and producers operating in the basin.
3 Permian Players in the Spotlight
Diamondback Energy is a well-known pure-play Permian player. In the prolific basin, FANG has a huge and high-quality drilling site, with the company estimating it at roughly 8,854 gross locations. The upstream energy major mentioned that those wells are economical even if the price of oil fell to $50 per barrel. Thus, with premium drilling inventories and an investment-grade balance sheet, Diamondback Energy, carrying a Zacks Rank #3 (Hold), is likely to capitalize on the ongoing strength of oil prices.
ExxonMobil has a strong footprint in the Permian and is among the key assets that the energy major believes will contribute to its long-term production growth. In the Permian, the integrated giant has been employing lightweight proppant technology and hence has been capable of boosting its well recoveries. With the acquisition of Pioneer Natural Resources in 2024, XOM enhanced its footprint in the basin, further strengthening its production outlook while realizing significant cost synergies. Thus, XOM, with a Zacks Rank of 3, is well-positioned to gain. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chevron also has a strong footprint in the Permian. CVX stated that it has an interest in one of every five wells in the most prolific basin. Over the years, while growing its operations in the Permian, Zacks #3 Ranked CVX has been able to generate more production while using lower capital spending, thanks to advanced drilling techniques. Thus, like XOM and FANG, CVX is also strongly placed now.